HS 330 EXAM QUESTIONS WITH
CORRECT ANSWERS
Family Limited Partnership (FLP) - CORRECT ANSWER✔✔-Family
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business enterprise used to transfer wealth in a tax advantaged manner.
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- Have general and limited partner interest
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- Only general partners have management control
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- Limited partners are often younger
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- Assets are owned by the partnership
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- Convenient way to gift assets that are generally difficult to break up
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- Means of giving away property and still maintain control
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- Keeping appreciation taxable to younger generation
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Discounts:
- Lack of Marketability
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- Minority Interest
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Entities with pass through taxation - CORRECT ANSWER✔✔-FLP, LLC, S
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Corp
, Intentionally Defective Grantor Trust (IDGT) - CORRECT ANSWER✔✔-
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Irrevocable trust that is a hybrid between grantor trust (for income tax
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purposes) and irrevocable trust (for estate tax purposes). Free of estate
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tax since it's irrevocable. The grantor is liable for the income.
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Benefits: |
- Grantor can transfer appreciated property into IDGT without incurring
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capital gains. |
- Grantor cannot reclaim assets once they are transferred.
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Self-Cancelling Installment Note (SCIN) - CORRECT ANSWER✔✔-an | | | | | | |
installment sale that terminates at the earlier of the (1) death of the
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seller or (2) the term set forth in the installment note
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- If structured in an installment sale, all capital gains on installments
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made will be liable to grantor
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If structured as a private annuity, the grantor cannot secure the sale
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without business collateral and they will owe capital gains on the sale
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immediately |
- SCIN must reflect a risk premium to compensate the seller for the risk
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of possible cancellation
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CORRECT ANSWERS
Family Limited Partnership (FLP) - CORRECT ANSWER✔✔-Family
| | | | | | |
business enterprise used to transfer wealth in a tax advantaged manner.
| | | | | | | | | |
- Have general and limited partner interest
| | | | | |
- Only general partners have management control
| | | | | |
- Limited partners are often younger
| | | | |
- Assets are owned by the partnership
| | | | | |
- Convenient way to gift assets that are generally difficult to break up
| | | | | | | | | | | |
- Means of giving away property and still maintain control
| | | | | | | | |
- Keeping appreciation taxable to younger generation
| | | | | |
Discounts:
- Lack of Marketability
| | |
- Minority Interest
| |
Entities with pass through taxation - CORRECT ANSWER✔✔-FLP, LLC, S
| | | | | | | | | |
Corp
, Intentionally Defective Grantor Trust (IDGT) - CORRECT ANSWER✔✔-
| | | | | | |
Irrevocable trust that is a hybrid between grantor trust (for income tax
| | | | | | | | | | | |
purposes) and irrevocable trust (for estate tax purposes). Free of estate
| | | | | | | | | | |
tax since it's irrevocable. The grantor is liable for the income.
| | | | | | | | | | |
Benefits: |
- Grantor can transfer appreciated property into IDGT without incurring
| | | | | | | | | |
capital gains. |
- Grantor cannot reclaim assets once they are transferred.
| | | | | | | |
Self-Cancelling Installment Note (SCIN) - CORRECT ANSWER✔✔-an | | | | | | |
installment sale that terminates at the earlier of the (1) death of the
| | | | | | | | | | | | |
seller or (2) the term set forth in the installment note
| | | | | | | | | |
- If structured in an installment sale, all capital gains on installments
| | | | | | | | | | | |
made will be liable to grantor
| | | | |
If structured as a private annuity, the grantor cannot secure the sale
| | | | | | | | | | | |
without business collateral and they will owe capital gains on the sale
| | | | | | | | | | | |
immediately |
- SCIN must reflect a risk premium to compensate the seller for the risk
| | | | | | | | | | | | | |
of possible cancellation
| | |
